Insights

Should you buy IAG (ASX:IAG) shares in August 2021 for the dividend yield?

Is the company a buy for its upcoming dividend this month?
The post Should you buy IAG (ASX:IAG) shares in August 2021 for the dividend yield? appeared first on The Motley Fool Australia. –

The Insurance Australia Group Ltd (ASX: IAG) share price has been on a rollercoaster ride for the entire year. In the past 12 months, the company’s shares are down 4%, with year-to-date moving slightly higher, up 4%.

In comparison, the S&P/ASX 200 Index (ASX: XJO) hit a record high yesterday, gaining 24% over the last 12 months. Year-to-date, the index has also surged above 14%.

During Thursday’s market close, the IAG shares finished 0.21 higher to $4.87.

IAG’s recent dividend history

Since this time last year, IAG has paid total dividends to shareholders of just 7 cents per share. You may be wondering why the figure is so low? Well, the IAG board went against rewarding shareholders in its FY20 release as a result of a challenging H2 FY20 environment.

Come February 2021, the company decided to pay an unfranked 7 cent dividend to its existing shareholders. This is a stark contrast from when IAG was regularly paying yearly dividends of 35 cents per share before COVID-19.

Based on the current share price of IAG, this translates to a dividend yield of around 1.4%. 

What to expect for IAG’s upcoming dividend?

While IAG isn’t due to report its FY21 financial results until 11th August, investors may be curious about what to expect for the upcoming dividend.

In July, IAG released a preliminary FY21 result pertaining some interesting numbers that were below Goldman Sachs forecast.

According to the update, Gross Written Premium (GWP) is expected to grow at 3.8%, while Net Earned Premium is forecasted to increase 1.5% to $7,473 million.

An underlying insurance margin is also predicted to come in at 14.7% for FY21. This metric recorded a 16% fall in the first half but is projected to bounce back by 13.5%.

In line with the earnings, analysts at Goldman Sachs believe the company will pay a full-year dividend of 22 cents per share. When factoring in the FY21 interim dividend payment of 7 cents, this equates to 15 cents for the second half.

How is the IAG share price valued?

Goldman Sachs’ latest report maintained its neutral rating on the insurance group’s shares. The investment bank indicated a 12-month price target of $5.41, which is slightly lower than the current IAG share price.

The post Should you buy IAG (ASX:IAG) shares in August 2021 for the dividend yield? appeared first on The Motley Fool Australia.

Should you invest $1,000 in IAG right now?

Before you consider IAG, you’ll want to hear this.

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More reading

The IAG (ASX:IAG) share price has dropped this last week. Here’s why
How is the IAG (ASX:IAG) share price performing against the financial services sector?
Is the IAG (ASX:IAG) share price in the buy zone?
Own IAG (ASX:IAG) shares? Here’s what to look for during reporting season
5 things to watch on the ASX 200 on Monday

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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